“Explosive” Purchasing By China Of US Farm Goods Needed To Meet Phase 1 Trade Deal Target

While it may not be impossible, it certainly is looking like a big, big stretch – the pledge of China to purchase far goods from the United States worth $36.5 billion this year with almost seven months of the year already gone, say analysts.

According to data, Chinese imports of US farm products till middle of May was lower than 2017 levels and very far away from the 50 per cent increment that had been agreed up on by the two countries. And despite a pickup in import of soybeans, China’s main farm import from the US, a very high level of spending by Beijing has to be incurred for it to make the target, said analysts.

But achieving the target could be far off given the current levels of tensions between the US and China, the impending Presidential elections in the US a global recession because of the novel coronavirus pandemic and questions about how much more soybeans would actually be needed by China, say analysts.

“It just doesn’t seem likely to me,” said John Payne, senior futures & options broker with Daniels Trading in Chicago. “If the global economy was more normal then maybe, but you have this whole COVID problem.”

The so called Phase 1 trade deal between the US and China was signed in January this year following a n intense and acrimonious trade war between the two countries for almost two years with both sides imposing tit for tat import tariffs on each other products. It had also resulted in a steep drop in imports by one of the biggest buyers of US agricultural goods.

When the agreement was made, there was skepticism among analysts about the target for export of farm goods to China which was set at 25 per cent higher than the all-time high of $29 billion achieved in 2013.

And yet, imports of US farm products were stepped up by China this year for a  range of imports with record setting imports of corn and meat.

“If I were to grade them today, we went from a C- to a B, and if it continues maybe we can start to see higher levels. But it needs to be a continual, ongoing affair,” said Dan Basse, president of AgResource Co in Chicago.

More than $2.5 billion in U.S. soy purchases in just the past eight weeks have been booked by Chinese importers despite a slow start.

“We may be on the verge of really beginning to ramp up sales to China. I think you’re going to start seeing these chunks of soybean sales happening pretty soon because Brazil’s getting close to sold out,” said John Baize, president of consultancy John C. Baize & Associates.

However with China making record volume of imports of soy from Brazil, there are concerns about whether Beijing will maintain the same pace of imports for the rest of the year.

Further the pace of economic recovery in China form the pandemic hit will also play a part as well as how the country recovers from a disease that killed hundreds of millions of pigs which reduced demand for feed.

(Adapted from Nasdaq.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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